Heat Treatment

In addition, rather than creating credit issues for the asset finance industry, tighter supply chains have underpinned the value of existing cars and equipment. A price analysis of 900 new car models by Drive found listed prices rose by an average of 14 per cent between January 2019 and January 2023.[3]

Metro has seen a growing appetite for electric vehicle financing as a result of the Federal Government’s FBT concession. This is particularly in novated leasing volumes, with one in three car loans now being for EVs and PHEVs compared with one in 20 in the commercial channel.

Metro Finance has experienced consistently strong business appetite for financing, having achieved 30 per cent year-on-year growth over the past five years. It was recently awarded the 2022 CAFBA Financier of the Year, Credit Team of the Year and Settlement Team of the Year. “Primarily represented by CAFBA, the commercial broker industry in Australia offers borrowers an important alternative source of finance to traditional bank lending. In the small-ticket asset finance market, third-party introducers account for 50-60 per cent of all originations”, Phillip says.

Metro lends to prime SMEs and individual borrowers in stable industries that purchase auto and equipment assets. It avoids lending to industries that are prone to volatility or for assets that have poor resale value. Metro’s loan portfolio is highly diversified, with risk diversified across geographical regions, borrower industries and asset types.

Metro differentiates itself in the market through high levels of personalised service, advanced backoffice technology, and a user-friendly portal. Through this combination, it can take a tailored approach to its lending: brokers approach Metro to work through different scenarios for a customer. Metro can assess each case individually to determine how it can help the borrower achieve their goals.

“We don’t run an opaque credit score model to process applications. Instead, brokers have direct access to a range of Metro personnel to discuss and workshop deals with them,” Mr Crossman said.

“Alternatively, when an application is straightforward, we can use streamlined processes to complete it quickly. Technology is critical for delivering speed and cost-effectiveness – for instance, customer onboarding and risk assessments. We can do deals in under two hours.”

Metro Finance is continuing to experience very low arrears and defaults, and Mr Crossman expects any dip in demand will just be part of the economic cycle.

“Capital markets are already factoring in interest rate declines. When inflation looks like it’s tamed and if the economy experiences a downturn, we anticipate the Reserve Bank will reduce rates to soften the landing.”

[1] https://www.capital-markets-intelligence. com/wp-content/uploads/2022/12/AustraliaWLY.pdf

[2] https://infrastructure.org.au/australian-infrastructure-budget-monitor2022-23/#:~:text=A%20total%20of%20 %24255%20billion,increase%20over%20 last%20year%27s%20allocations.

[3] https://www.drive.com.au/news/newcars-beating-price-rises-and-hardest-hit/